Saudi Inflation Holds at 2.1% as Non-Oil Growth Drives 1.4% GDP Expansion in Q1 2026

Key Takeaways

• Inflation at 2.1% in May 2026, according to the General Authority for Statistics (June 2026 release).
• Central bank repo rate stands at 5.50%, with the next SAMA decision on 24 July 2026.
• GDP grew 1.4% in Q1 2026 on a quarterly basis, and 3.8% annually for 2025, per GASTAT.
• Unemployment fell to 4.7% as of Q1 2026, the General Authority for Statistics reports.
• Upcoming data: CPI for June on 15 July 2026, and Q2 GDP on 30 August 2026.

The Data

RIYADH — Saudi Arabia’s consumer price index rose 2.1% in May 2026, the General Authority for Statistics reported in June 2026, reflecting moderate inflation across the economy. The reading keeps price pressures well below levels that would alarm policymakers.

Headline inflation remains contained, with the 2.1% figure from GASTAT representing a steady pace. Core inflation, excluding volatile items, has not shown signs of accelerating, and food and housing costs have remained broadly stable in recent months.

The Saudi Central Bank (SAMA) holds its repo rate at 5.50%, with the next policy decision scheduled for 24 July 2026. The current rate reflects a cautious stance as the central bank balances domestic growth with global monetary conditions.

Gross domestic product expanded 1.4% in the first quarter of 2026 compared to the previous quarter, GASTAT data shows. For the full year 2025, annual GDP growth reached 3.8%, driven by steady oil output and strong expansion in the non-oil sector, which continues to be the primary engine of economic activity.

The labour market improved, with the unemployment rate dropping to 4.7% in Q1 2026, according to GASTAT. This marks a continued decline in joblessness as the non-oil economy creates new positions.

Non-Oil Sector Leads Growth as Oil Output Holds Steady

The most significant story in Saudi Arabia’s economy right now is the sustained strength of the non-oil sector. GASTAT reports that non-oil activity is growing strongly, offsetting the steady but unspectacular performance of oil output. This shift is central to the kingdom’s economic diversification strategy.

Private sector demand, particularly in services and construction, continues to drive job creation and investment. With oil output stable, the non-oil expansion provides a buffer against global energy price volatility and supports the broader growth trajectory.

What This Means

For households, the moderate 2.1% inflation rate means the cost of living is rising slowly, which helps preserve purchasing power. With unemployment at 4.7%, more Saudis are finding work, though mortgage rates tied to the 5.50% repo rate keep borrowing costs elevated for homebuyers.

For businesses, the stable policy rate from SAMA means borrowing costs remain predictable, supporting investment planning. Input prices are rising only modestly, and strong non-oil demand signals a healthy environment for firms serving the domestic market.

Outlook

Markets will watch the next CPI release on 15 July 2026 for signs of any inflation acceleration. The Q2 GDP data on 30 August 2026 will show whether the non-oil sector maintained its momentum through the middle of the year.

Analysts expect SAMA to hold rates steady at the 24 July 2026 meeting, given moderate inflation and steady growth. The key risk remains global oil price movements, which could affect fiscal revenues and overall economic stability.

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Data sourced from General Authority for Statistics (stats.gov.sa) and SAMA (sama.gov.sa). Analysis by Economic Pulse Data Team.

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Edited by Editorial Desk. Fact-checked by Editorial Desk. This is analysis, not financial advice.